Wheeler dealer: Young grain merchant suddenly owes $5M
DEVILS LAKE, N.D. -- Hunter Hanson, 21, of Leeds, N.D., is a young man in a hurry.
Over the past three years, he has seemed to be an entrepreneurial wonder, registering seven businesses with the state of North Dakota. In early November, the North Dakota Public Service Commission started getting complaints on two of his businesses -- Midwest Grain Trading company and NoDak Grain, both based in Devils Lake.
As of Nov. 21, Konrad Crockford, director of the PSC compliance division, says calls have come in related to some $5 million to $6 million in “bounced, canceled or stopped checks or people owed for grain they had priced.”
Hanson says the totals are far lower.
At age 20, Hanson started a roving grain buying company on March 21, 2017. He became licensed about two months later, after industry complaints.
On Sept. 11, 2018, Hanson also formed Nodak Grain, under a “warehouse” license using two older wooden elevators.
In an interview with Agweek on Nov. 21, Hanson said his company had about 100 grain clients and that his business grew “at least 75 percent in one year,” he said.
Also on Nov. 21, the PSC held a special meeting to issue a cease-and-desist order against his companies. The PSC plans to initiate an insolvency petition in district court either in Burleigh or Ramsey counties.
On Nov. 27, the PSC held a strategizing meeting with legislators about potential legislation regarding protections for farmers dealing with roving grain buyers. Nothing was immediately decided. Roving grain buyers have a minimum requirement of a $5,000 bond, but the PSC has a formula that sets bonds higher -- $400,000 for Midwest Grain Trading, protecting farmers in cash sales. NoDak Grain has a separate bond totaling $150,000 in cash sales for its two facilities.A frozen hose
Hanson told Agweek that some of his problems stem from a frozen hose in one of his elevators. The sump pump froze, dumping water into bins at the Rohrville facility, northeast of Devils Lake.
That caused 32 trucks to be rejected from scheduled deliveries, he said. “We would never have had this issue if that grain would have been delivered,” he said.
A separate issue involving bounced checks was caused by a “misunderstanding in the office,” where he has two employees. Some checks “were not supposed to be issued when they did,” he said.
“We tried to contact everybody on the list that was affected but ... we didn’t call everybody on time,” he said. “They called the state and that’s when the state got involved.”
NoDak Grain doesn’t have the “capital big elevators do, like CHS,” he says. “We pretty much rely on cash flow. If you have one hiccup like we did, it’s very tough to overcome it.”
“Growing pains,” he said.Self-taught
When Agweek asked Hanson how he learned the grain trade, Hanson referred to his six years of experience in elevators.
“I’m young, but I’ve been around it for six years now,” he told Agweek. “It’s not like I woke up last week and decided to do this.”
When pressed about marketing training, Hanson said:
“I picked that up on my own,” and added, “It’s a fast-moving industry. There’s lots of different variables, lots of things that can happen. You have to be on your toes every day.”Early experience
Hunter Brian Hanson was born May 17, 1997, to Keith and Jennie Hanson. Hanson spent his high school years in New Rockford, living with his grandmother, Jeanith Johnson.
He graduated high school in 2015. The caption next to his senior picture: “Teacher’s Pet: Plans to go straight into the workforce with a hope to become an entrepreneur in his own Biodiesel Business.”
While in high school, he says he worked “every night” at the Allied Grain elevator at nearby Barlow, N.D.Reliability issues
After high school, John “J.R.” Rick, general manager of the Equity Cooperative Elevator Co. in nearby Sheyenne, N.D., hired Hanson in early October 2015 as a truck dumper but gave him “absolutely no training” in grain marketing.
Rick said Hanson talked about big plans, including that he was going to “buy his own elevator and do a biodiesel business.” Unbeknownst to his boss, Hanson had already registered his Dakota Biodiesel business with the state on July 1, 2015, using his grandmother’s address in New Rockford.
Then on March 8, 2016, Hanson established Midwest Hauling and Transport to do “hot hauling, transporting cars, goods, etc.” according to the North Dakota Secretary of State business filing.
Rick said Hanson was not always reliable. In one case, Rick said Hanson failed to fully load middle hoppers in two cars, sending a train out without a full load of grain.
In July 2017, Rick heard a rumor that Hanson was looking for a new job. He called him into the office and told him that harvest was coming and if he was leaving, Rick needed to know.
Hanson said he was staying but the next day failed to show up, and never did again. “He just packed up and left,” Rick said.
In November 2016, Hanson was re-hired as a driveway employee at Allied Grain at Barlow, where he worked in high school. In April 2017, Jeremy Sorenson, Allied Grain’s manager, said he terminated Hanson for bringing in samples for another grain business he was operating. That same month, the PSC censured Hanson for buying grain without a license or bond.
In May 2017, CHS Lake Region Grain at Devils Lake hired Hanson for about six weeks as a laborer in a fertilizer plant. CHS General Manager Mark Greciar said Hanson told them he wanted leave to go on a vacation cruise with his mother, and never came back. “We were hoping to hire him ... but he never showed up again.”Biodiesel overture
Amidst his elevator jobs, Hanson approached the Minnewaukan City Council on an idea to build a Dakota BioDiesel plant in the city’s industrial park.
In February 2017, the Minnewaukan City Council voted to allow Hanson to buy up to six acres in the industrial park at $3,000 per acre, or up to $18,000.
“We create BioDiesel out of soybeans, canola, sunflowers, and used cooking oil,” Hanson said in an informational booklet.
He’d produce 3.2 million gallons per year and would add a “gas station-conscience store” (sic). He said he could start building that spring and added it could take up to three years to “get the funding and materials needed to finish the project.”
He said it might take $2 million in start-up costs, but with net profits of $750,000 annually for the biodiesel; $25,000 for the gas station; $25,000 for the convenience store.
After the approval meeting, Sherri Thompson, Minnewaukan city auditor, said she sensed a “red flag” when she asked about his financial underpinnings.
“His financial backer was Midwest Grain Trading,” Thompson recalls him saying. “I said, ‘Who is this?’ He said, ‘That’s me.’” she said. She told him they’d need more information to “show that this can happen.’”
Hanson disappeared, until November, when asked to be put on the council agenda. But he was a no-show for the November meeting and again in December.
In his interview with Agweek, Hanson described his biodiesel plans as simply “a thought” and said he’d known for three years he wouldn’t do anything in it.Wooden houses
Hanson turned his attention to finding facilities for his grain-buying business.
Hanson said buying old, wood-construction elevators was no big deal.
In about November 2017, he bought the Tunbridge Farmers Co-op Elevator building about six miles west of Rugby, with access to the BNSF Railroad tracks.
Delmer Fandrich, now 83, managed the Tunbridge site from 1961 to 1998. Fandrich purchased the manager’s house that is across the street from the facility.
Fandrich says that in the summer of 2016, Hanson showed up at the Tunbridge facility. The young grain merchant asked the old manager if thought it was worth $5,000.
“I said, ‘I don’t think it’s worth ANYTHING because of how much it’s going to cost to put it back into operation,’” Fandrich recalls telling Hanson. In November 2017, Hanson showed up and started operating the elevator. Scott Foss of Lone Prairie Grain, Maddock, N.D., said he’d sold it to Hanson.
In October of this year, neighbors (not Fandrich) complained about spilled peas creating spoilage and smell. Sheriff Joshua Siegler said the issue has been passed on to the North Dakota Health Department.
Hanson said some 5,000 bushels had spilled and most had been picked up. “I don’t see it in my eyes as a huge deal,” Hanson said.
In May 2018, Hanson went back to his old boss at CHS Devils Lake and asked about buying an old elevator property near Rohrville, N.D.
The 156,000-bushel Rohrville site stands on a short line of the Canadian Pacific Railway and hadn’t loaded trains in about 20 years. For the past several years, CHS had operated it from harvest through December and CHS was considering shutting it permanently.
In June, he was scheduled to close the deal, but never showed up for the closing and didn’t call. Then on Aug. 24, he showed up without warning and paid with a $100,000 check.
In North Dakota, a roving grain buyers license requires a minimum $50,000 bond, and a $200 license fee. The Tunbridge warehouse license was effective June 25, and carried a $65,000 bond. The Rohrville site license was effective Sept. 11, 2018. The combined license with a $150,000 bond.Competitive pricing
Midwest Grain Trading advertised prices higher than large train shippers. Radio ads appeared on stations in the Devils Lake area.
Farmers said Hanson offered 17 to 20 cents more per bushel than large companies with shuttle-loading facilities. Nodak Grain’s website on Nov. 21 said the company offered credit sale contracts on corn and spring wheat. The grain could be stored for free if priced before July 30, 2019. After that, the company would charge 5 cents a bushel per month. “Expect two to three weeks (delayed payment) on checks due to high number of settlements,” the website says.
Hanson told Agweek he’d traded some 2 million bushels and that his companies had “$50 million in business this year,” but quickly corrected that to $23 million. The companies made money doing “volume with small margins.”
The company coordinated the activities of 30 trucks, hired as owner-operators. Hanson said his role was to do the “buying and selling and look to expand and build customer relations.”
Midwest Grain typically picks up grain in one area and hauls it to a market in another area, theoretically making money on the freight and an arbitrage between the prices. The company effectively takes out the “middlemen,” he said.
Rick, the elevator manager at Minnewaukan, acknowledged being ribbed by farmers about the competitive prices offered by his former employee. “They were saying, ‘Jesus, J.R., Hunter’s paying 20 cents per bushel more than you and he’s picking it up off the farm,’” Rick says. “I said, ‘Well, he might be paying 20 cents off the top, but when it comes down to getting paid” it might be smarter to deal with the elevator.‘Successful business’
Grain trading has “been a very successful business” in the last two years, Hunter says, acknowledging it could yield a six-figure income. He said he’s bought “quite a few” pickup trucks this spring and summer in anticipation of expanding NoDak Grain into the seed business.
After her high school graduation this past spring, his girlfriend posted photos of a trip they had taken to Paris in the summer. “That’s just a vacation,” Hanson says.
Since July, Hanson purchased two rural or downtown properties in the Leeds area -- a total of $95,000, with no mortgages listed on the deeds.
On Oct. 19, he became the named partner in Hanson Motors. It’s a used car dealership at Belcourt, N.D, located on land in belonging to the Turtle Mountain Band of Chippewa. His partners are Stuart Medrud and Ray Parisiene Jr., who ran for tribal council in 2018.
“I’m young and I want to do the best I can in different industries and that’s one of them, I guess,” Hanson explained, about the variety of his enterprises.Temporary setback
Hanson still has hope for his grain-trading business, despite the PSC’s actions. Hanson says matter-of-factly that the PSC has “got to do their job, and that’s to protect elevators and farmers in a timely manner.”
He describes the “cease and desist” order as a temporary thing, “until everything gets figured out.”